Heather McGhee on Student Debt

In this 2012 Moyers Moment from Moyers & Company, Heather McGhee, director of the Washington office of the research and advocacy organization Demos, talks about the crushing burden of student debt. She points out that while young people are paying as much as 18 percent interest on private student loans, “the banks they’re paying that interest to are getting, basically, a zero-interest loan from the government every day.”

BILL MOYERS: I read just the other day that only 29 percent of Americans have college degrees. Is college still a way up and out?

HEATHER McGHEE: It is. And you would think-- I mean, this is one of those great ironies. At the same time that we had the globalization, the transfer from the industrial age to the information age, and so the premium on higher education became so high. At the same time that we decided to reorder our economy so that those with information and with knowledge would be able to gallop ahead, we also made it less affordable and more difficult for people to get that new golden ticket to a middle class life. It doesn't make any sense. At around that same time, around when I was born, we shifted our federal support for higher education. It used to be the majority of it was grants, grants like the G.I. Bill that put my grandparents to college, grants like my parents had, to loans, which is what the majority of my generation is now taking on in order to basically pay government and the banks for the privilege of having a middle class life.

BILL MOYERS: Yeah, what does it say that many of you have to pay Wall Street to go to college today?

HEATHER McGHEE: It's amazing, isn't it? And not only do we have to do that, but particularly with these private loans, which are just galloping, galloping away, in terms of how quickly they're becoming a share of the market, it's like 18 percent interest on some of these private loans. It's like putting your $10,000 tuition on a high-interest credit card. And if you think about that, if you think about the fact that the next generation has to pay an 18 percent interest rate to get a college education, whereas the very banks and financial companies that they're paying that interest to are getting basically a zero interest loan from the government every day, it's shocking.

BILL MOYERS: We have a video clip of a young man who's speaking at a rally objecting to tuition increases. Let's take a look at it.

PROTESTER: Me myself, I’m in debt $70,000 and when do I expect to be free of this? Possibly never. I actually got a letter from Sallie Mae, saying that if I don’t start paying today, $900 a month, they are going to have more aggressive attempts at collecting my debt […] And so I refuse to pay this student debt, for this ball and chain that will follow me the rest of my life. And so I’m going to burn this right here and now.

BILL MOYERS: How do you respond to that?

HEATHER McGHEE: Honestly, it really does breaks my heart, Bill. If you think about what young people are facing when they know that they have to play by the rules, go to college, get a good education. And yet, they know that the price of that is going to be tens of thousands of dollars of debt on the other end, what options are young people supposed to have? I really don't think that we can say as a country that we are a middle class nation, that we care about recreating a middle class for the future generation, and have an entire generation indebted. And have so much money diverted from more productive uses in the economy simply to pay off loans from a really flawed financial aid system.

BILL MOYERS: He quoted a letter from Sallie Mae. For the benefit of my audience, who's Sallie Mae?

HEATHER McGHEE: Sallie Mae, other than being one of the most profligate contributors to Washington and one of the biggest lobbies, is a massive financial company that is, their entire business model is on student loans, private and federally subsidized.

BILL MOYERS: As you know, the Obama Administration tried to do something to clean up that student loan business, and got a piece of legislation through that was promising. But then lobbyists from the industry, including many who belong to the Democratic Party swarmed all over it, and have, in effect, throttled it. What does that say to you?

HEATHER McGHEE: It says that the financial industry is an equal opportunity employer of Congress people, unfortunately. We've really seen an incredible explosion in the amount of financial contributions from the financial sector, including Sallie Mae, Wall Street banks, real estate, insurance over just the period of my lifetime. And the result has been that any time there are any kinds of steps forward, there's always a desire to sort of erode the progress.

BILL MOYERS: Yeah, you're sympathetic to that young man and to all of them like him. But do you think refusing to pay is a solution?

HEATHER McGHEE: You know, I think the right solution would be for us to undo what Sallie Mae and other lenders got slipped into that terrible 2005 bankruptcy bill. Which is that private student loans and student loans are not dischargeable in bankruptcy. I mean, think about it, bankruptcy, which, you know, huge, multi-billion dollar corporations are-- seem to be filing every day and move on, just as if nothing happened. And yet, regular, middle class families, the average American family, the two most important loans in their life, the two most onerous loans in their life, for education and for their primary residence, they can't be relieved of in bankruptcy. Our bankruptcy code says to the American people, "You don't have any second chance when it comes to those two major primary loans." We're just making people give up so early on, because it's impossible to get out from under debt like that.

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A country which refuses to educate its young people destroys its own future economic strength. By stifling students with hundreds of thousands of dollars of student loans, the United States basically destroys entrepreneurial spirit and creative drive. Most graduates, frankly, are more concerned with paying interest than with creating new businesses.

My advice to American students and young scholars… Get the best education you are able to afford, then leave the US. Go produce in another country. Save your money; pay back your loans if you want – or not. I left the US, landed in Mongolia, married here and I am raising kids here. My biggest regret? I should have left the US directly after University, and nixed the student loans. Students do not go to school to pay off student loans. Students seek higher ed to produce. And if the US will not allow you to produce. Go produce elsewhere. It’s only money, after all. They’ll print more.

By the way, there are plenty of quality universities in Asia which teach in English. University of Hong Kong, for instance, is ranked 18th in the world. Tuition? less than 14,000 USD per annum (including board).

nwcda

please educate me… earn the money first then spend it on your college education. who owes you a higher education?

Expat in Mongolia

Hence. The exact problem with the US education system. Brainwashing the youth into believing that one may earn into the American dream. All the while large corporate interests running the federal system while dumbing down the youth into the false belief that their votes actually count for much. The average American is raised with an attention span of about 5 minutes – by design. The education system indoctrinating youth into some false sense that the American system is actually capitalist. The only capitalism which ever existed in the US was in the Philadelphia of Benjamin Franklin – with a plethora of smaller business owners and shop-keepers who watched over each others shops, so that not even police were needed. SMALL business owners involved in trade to benefit the business owners AND the common-wealth. No small wonder that Ben Franklin was astute enough to both recognize the advantage of compound interest within the burgeoning democracy so he left a bit of cash to endow University of Pennsylvania to provide education for the future generations. He was well aware that the future tax base rested upon the shoulders of future educated producers. Thomas Jefferson probably said it best: “An informed citizenry is the only true repository of the public will.”

From Federalist No. 10:…These must be chiefly, if not wholly, effects of the unsteadiness and injustice with which a factious spirit has tainted our public administrations.By a faction, I understand a number of citizens, whether amounting to a majority or a minority of the whole, who are united and actuated by some common impulse of passion, or of interest, adversed to the rights of other citizens, or to the permanent and aggregate interests of the community.There are two methods of curing the mischiefs of faction: the one, by removing its causes; the other, by controlling its effects.There are again two methods of removing the causes of faction: the one, by destroying the liberty which is essential to its existence; the other, by giving to every citizen the same opinions, the same passions, and the same interests.

Who owes me a higher education? Myself.

However, if the US actually gave a damn about its future, it would invest in its future by providing a fair mechanism to educated its progeny. As it stands now, it seems to me, there are certain factions in the US who would rather keep the citizens as dumbed-down (or as busy repaying debt) so as to remain oblivious as to who controls the reins of power.

So again, if the US (not the government, but the US *corporate culture* if you will) actually cared about its future economic growth, tax base, and leadership, it would place more effort into making higher education more affordable for all citizens.

(Oddly enough, when I was growing up in the US, I was oblivious to the fact of how much lower Canadian tuition is for Canadian residents – and how few Americans are aware of that fact.)

The debate is not about capitalism, socialism, republican, or democrat. Humanity is well beyond that. There is no true capitalist system, and the US does a dis-service to its citizens in professing to even be one, while indoctrinating its youth to *work hard* to achieve the American Dream. The American Dream? Borrow $150,000+ for university $150,000 for grad school and remain in debt until age 70? While banking interests charge the citizens for the privilege of holding the citizens’ money? And to add insult to injury, the government (controlled by those same banking interests) doles out $1 TRILLION+ of taxpayer money to perpetuate the same corrupt system?

Rather, the debate now, as it ever has been, is between a privileged few who wish to control the power in order to assure that their genes have a greater chance of survival. It’s as simple as that. The question, it seems to me, is the extent to which human society can actually embrace Enlightenment and post WWII ideals and progress to a higher level of intellectual achievement and production.

When I pay off my undergrad loans I will have paid 160,000 dollars. That’s if I pay them off on time. And that’s not including Grad school, which I will be attending in the fall. I receive almost no money from the government, yet there is NO WAY my family can help pay for my schooling. I received the highest academic scholarship my school offered, and graduated summa cum laude, and still will have this enormous debt on my shoulders forever. I will never be rid of it. I am dreading the day I realize that I will be broke forever, all because I wanted to be a highly educated woman. It makes me sick when I think about it.

Brandi

Couldn’t you have gone to a more affordable school?

Parris

The attack on democracy appears orchestrated, doesn’t it? We all know that educated Russian students were much the cause of the Russian revolution. It appears, and I don’t mean to be ranting here, that the rich “corporate class” is acting to make certain that our lower middle and lower classes cannot get an education without indenturing themselves to The Man. They suspect, as do I, that kids who pull themselves out of the lower class by learning, by achieving more of their potential, will have a natural bias toward a fully functional democracy.

Anonymous

QUOTABLE: “Students do not go to school to pay off student loans.” They go to get an education, achieve more of their potential, and to be productive.

Understanding the System

It’s about a FAIR and EVEN loaning system.. Companies with the help of gov has only created another bubble.

Darryl Price

Why not attend an affordable state school, graduate summa cum laude with virtually no debt?